Examination of witnesses (Questions 60
- 79)
WEDNESDAY 3 MAY 2000
MR GORDON
SUMMERFIELD and MR
DAVID MCNAIR
Mr Borrow
60. Can we look at the overseas offices network
that you have? You mentioned earlier on that the offices had been
privatised, and there was brief discussion on the difficulties
of setting up a new office. Am I right in assuming then that if
a new office is set up, it is set up initially as a privatised
office, or is it totally funded from your organisation and then
subsequent to that privatised?
(Mr Summerfield) It would not be. What has actually
happened is that we have 13 offices around the world. We have
10 that are relatively well established and they get a contribution
from us to their overhead costs and we see their monthly accounts
to make sure that they are viable activities. When it gets down
to a new country I think, again, because we are quite new in this
role, one has to look at how we approach a country. Is there really
a market there? Can we develop an export market? Can we develop
a viable office there with a relatively small amount of funding
in total? To give you the overall level, I do not think we fund
any one of the offices to more than 15 per cent of its total cost.
There is no way we could even contemplate funding it totally from
day one, nor would we. It is the way we would approach the country
to see if the market can be developed there and the people. It
is about management. At the end of the day, the office is as good
as the overseas director who has the energy and the drive to sell
consultancy and to sell his services to the United Kingdom manufacturers
that want to export.
61. If you are looking at a particular overseas
market, would there be an incentive, from your point of view,
in looking for additional funds from particular United Kingdom
manufacturers who would then see the opening of such an office
as a benefit to their company in export in the future, or is it
simply something that you as an organisation would be proactive
in?
(Mr McNair) We tend to be proactive in terms of the
latter, but in being proactive we are conscious both of what we
see as being the opportunities in that market and the likelihood
of a number of companies being interested because of early soundings
that we have made with them in moving into that market. The other
thing that we have been conscious of, and it touches on the changes
that are actually happening in terms of market trends, is that
we increasingly see that we are meeting the same retailers in
different markets around the world. The reality is that increasingly
for markets in Latin America, the Iberian Peninsula and Eastern
Europe, many of the decisions are actually getting taken by organisations
based in the Netherlands or in France, and that is one of the
areas that we need to be thinking about structurally going forward
and how we are going to manage some of those transnational retailers
in order to make sure that United Kingdom interests are strongly
represented with their buyers as they develop into new markets.
The buying decisions and stocking decisions sometimes for Portugal
actually get taken in Paris or Holland.
62. Coming back to the actual management of
the overseas offices, the review that was done in 1998 by the
Efficiency and Effectiveness Organisation did point to some variability
in operations and standards of services across overseas offices.
Do you think that is related to the fact that they are run privately,
or is that something which since then you have been able to address?
(Mr Summerfield) I mentioned earlier about management
and I think that if one looks at the offices that we have they
are all very different, they all have to have central core competencies,
but some of them then have additional services that they offer,
because the individual that runs them has a particular flair.
The one that springs to mind is France. We had quite a lot to
do with Marks and Spencer. The reason? The overseas director running
the French office comes from the public relations industry, has
a good PR department, funds it and drives that quite hard and
gets a lot of income from that, and as a result of that, grows
his business into a different shape from the business that is
either in Italy or Spain. It does depend very much on the individual.
(Mr McNair) In relation to Spain, interestingly, there
we have an individual whose background was in the distribution
area, and that is highly appropriate for that market where distribution
is still highly fragmented because of the regionality of that
country and, therefore, he has been coming forward with quite
imaginative solutions which allow United Kingdom companies to
address the fragmentation of distribution within that market.
63. I can see advantages in having the overseas
offices run by overseas nationals, but is there any drawback in
terms of the relationship with British diplomats in the countries
where these offices are located, or are you quite happy with the
close liaison between our embassies and the offices?
(Mr Summerfield) They are not all nationals any way.
We have a British overseas director in Germany, we have a British
overseas director in Italy, and there is an American in Japan,
so it is quite diverse any way, but whatever the case, we have
extremely good working relationships with the embassies. Quite
recently I was in Shanghai and met up with the Consulate General
there, and I was also at the office of the Embassy in Japan. They
are very helpful to us. There is no doubt that there are a number
of doors that have been opened with the retailers through our
offices in those countries.
(Mr McNair) That is quite an important issue to recognise
in terms of providing a stepladder for companies. Where we find
the embassies and British Trade International are particularly
helpful is in new developing markets where we do not have the
resource there, and they are able to provide some of the basic
information and some of the support and funding for inward and
outward missions and exhibitions. What happens is that we develop
a stronger presence in any one market. We have got to sit down
and discuss very clearly with the embassies, the Commercial Attache
of those markets and the BTI our separate roles in order to ensure
that they are complementary rather than duplicated for the British
taxpayer.
Mr Mitchell
64. Do you follow British Trade International's
guidance on target markets?
(Mr Summerfield) We do, but I have to say that my
personal involvement with British Trade International has been
fairly limited to date. We recognise that there are quite a number
of areas where we need to foster a good working relationship and
ensure that we do not have duplication. To that end I have a meeting
set up for May 11th to start that process with British Trade International.
We do have a good working relationship with them, but we have
to be careful that there is not an element of duplication.
65. The way you put that indicates a problem.
(Mr Summerfield) I do not think it is a problem, but
I think that it is recognising where the individual organisational
boundaries are. If we are not represented in, for example, China,
with an office and if British Trade International can open up
doors for us, then we ought to be there, but we would not want
to go and fund an office there. If we are both in the same country
we ought to discuss who does what, rather than both doing it,
and that really is something we need to resolve, and I am sure
we will.
66. Is there any overlap on market studies?
Do you do your own market studies or do they do them for you?
(Mr Summerfield) Again, it is a mix and match. If
we are not in a market, they will do it. There is no point in
us trying to reinvent the wheel. If that organisation or arrangement
is there and we can get the information, there is no point in
us duplicating that cost to go and get it for ourselves.
67. I wonder, would there be virtue in your
work in food promotion if you were to actually merge with British
Trade International?
(Mr Summerfield) I do not actually see it that way,
but you say, "Well, he wouldn't, would he?" I think
that if one looks at our role, our role is food and drink absolute.
British Trade International is export of everything. I think to
give clarity to food and drink is an important issue.
68. Do you think it needs specific skills for
that?
(Mr Summerfield) Undoubtedly.
(Mr McNair) I think you actually have to turn it round
the other way. You have to look at who your end consumer and customer
is and have particularly strong relationships in the channels
of distribution to meet those particular requirements. I think
that is the skill set that our country directors bring. What I
have been impressed by is the regular involvement and the close
relationship that they have with the major retailers in each of
their markets. That is something which realistically BTI cannot
do to the same extent.
Mr Borrow
69. You mentioned in your original presentation
about the role of the organisation in promoting speciality foods,
in terms of the budget it is a relatively small part of the operation,
I just wondered to what extent it is, if you like, in a separate
compartment and run separately and whether you feel there might
be some merit in setting up a separate organisation to do that
or whether you are satisfied in terms of how it fits in with your
main thrust, which is export promotion?
(Mr McNair) We are satisfied in terms of the way it
fits within the organisation. Its direct funding is about half
a million pounds. We have one director and one manager to support
that. Essentially we are working very closely with the regional
taste organisations. You must remember, while we help that particular
speciality food group there are many speciality food companies
who then benefit, having been introduced to Food from Britain
and then benefit through a number of the other services we have,
such as exhibitions and events, through market research reports,
through introductions to market. Therefore speciality food companies,
such as fruit juice companies, small tea companies and small confectionery
companies have access to the whole of the Food from Britain services,
other than the particular earmarked expenditure we have to support
initiatives for the regional taste groups.
(Mr Summerfield) There is also speciality-foods.com,
which is an important development for us, giving small companies
access to modern methods of selling products around the world.
I think that is an innovation. We already have 38 companies on
our shopping mall and we would expect to continue to expand that.
At £200 that gives a very small producer the opportunity
to enter a very large arena.
70. Do you have a clear view of what your target
audience is for the promotion of speciality foods?
(Mr McNair) In what respect?
71. You are obviously working with small companies
in terms of giving them assistance. In terms of helping them to
promote their products does your organisation have a domestic
market, an overseas market? Do you have a clear view of what type
of companies you wish to targets for the speciality food companies
to sell to?
(Mr McNair) There is a broad range. However it has
been able to make those potential customers more easily accessible
to those companies. At one end that can be through electronic
commerce, which gives them direct access to individuals, wherever
in the world, who may be interested in the products, through to
contacts we have with major retailers who may want to promote
a particular area of speciality foods. In terms of a stepping
ladder to export success a good example is Walker's Shortbread,
who very much started and benefited from the work that was being
done in the speciality food sector of department halls of various
up«market stores around the world. As this business has grown
increasingly they have been able to move it from the speciality
sections of department stores into the mainstream biscuit area
of major retailers. That has helped grow their business over time.
That highlights that there is no instant success. It takes year
of hard work, commitment and enthusiasm to build that business
over time, because you have to go through those stepping stones.
72. In the organisations corporate plan for
last year you mentioned some disappointment in terms of receiving
support or funding from regional development agencies. I wonder
what use would you make of funding, what sort of projects did
you have in mind?
(Mr McNair) I cannot recall that comment being made.
With our involvement with regional taste groups we are not trying
to create a dependency culture, we want to encourage those organisations
to be able to stand up on their own two feet over time. We have
been putting in seedcorn money as the organisation has grown in
confidence, in size and revenue from other sources. We have been
able to pull back and wean the funding away from the individual
groups to try and create some more national activities, which
is a particular area of strength for us in terms of our consulting
skills and services, rather than just funding. If the regional
taste groups are finding other sources of funding, whether it
is from the EU, on the one hand, through to regional development
agencies, on the other, then we welcome that because it frees
our money up to actually provide some more general skills and
services, such as the website development.
(Mr Summerfield) Within the overall funding of the
six groups they do not all get the same. The more successful ones,
because they have been in a lot longer, would get a lower level
of funding than the more recent ones and the ones that are still
in the stage of development.
(Mr McNair) Strategically what we want to do over
time is to wean them away from funding to a position where we
are actually able to provide services rather than money to them.
Those services are part of the services that we are providing
to a much wider range of companies so that they benefit from the
economies of scale and the quality that we can offer all food
and drink suppliers.
73. Do you find in speciality food companies
that there is scope for development in terms of developing a regional
brand, a regional label. We talked about Wensleydale cheeses,
and certainly I am aware of speciality Lancashire cheeses in my
part of the world. To what extent do you feel there is a role
for your organisation in assisting the promotion of a regional
brand or do you feel that is something that should be picked up
much more on a regional level by other organisations?
(Mr Summerfield) Arranging to meet the buyer of a
national supermarket in the regions has been an important step
forward. Getting into the buyers office is very often one of the
barriers to entry. In association with one of the national companies
we have been able to get manufacturers in to see these buyers.
The buyers have actually gone to the regions as well. That is
an important introduction arrangement that we have arranged and
that is quite successful.
Mr Paterson: Do not forget Shropshire Blue.
Mr Borrow
74. How does your agency compare to similar
agencies run by other European countries?
(Mr McNair) The Chairman made reference to Sopexa
earlier, which is one where we have a clear view on figures. As
a result of the scale of funding it determines the kind of activities
and the range of services that we are able to offer. That, as
we understand it, partly stems from the way that Sopexa has been
funded over time, it has been a mix of direct government funding,
regional funding and also levies on various food and drink trade
bodies. As the Chairman in his introduction mentioned, they have
significantly higher levels of funding than ourselves. That raises
issues about cutting our cloth accordingly. If there was more
funding available we would potentially look at opening up further
markets, developing further services and being able to publicise
our services to a broader range of companies. It is interesting
from the backgrounds from which both my Chairman and I come, albeit
we were in major companies, we were not that aware of the range
of services and the quality of services that Food from Britain
had to offer before we got involved in the organisation. On the
one hand you might say, quite rightly so, multi-nationals should
be following their own plan but the reality is that on many occasions
those multi-national companies can, in fact, be the means of helping
us build a stronger presence in a number of markets and sectors
in different parts of the world. For example, when I worked on
Johnnie Walker we had a major sponsorship of a Burns Supper in
the Kremlin. Because the Scotch whisky industry had been able
to open the door to that it meant that they were able to invite
a whole host of other British food and drink companies to come
to that event and meet their opposite numbers within Russia and
start to build businesses in that area. Sometimes it would be
a mistake to ignore the opportunities for mentoring and support
that larger companies can actually give us in order to help benefit
the wider range of food and drink businesses. We are also helped
in terms of our council, in terms of its composition. We have
had major representatives from retailers such as Sainsbury's,
from companies such as Whitbread currently who are able to provide
us with invaluable help and advice to introductions to various
markets for a whole range of smaller and medium sized food and
drink companies.
(Mr Summerfield) If we look at the funding of Food
for Britain since 1991 it is down in real terms by some £300,000.
£5 million or thereabouts is—we would all say that
we can always do with more funding—a fairly small amount
of money.
Mr Todd
75. Turning back to the role of RDAs, which
I raised earlier but I laid off because I could see this was coming
up later on. Your answer was with one RDA—which I know has
an active strategy in the development of its food sector and has
a Chairman who was formerly in the food industry as well—I
found, strangely, aloof. You said, "We are standing back
from that to see if it works", and so on. Please explain
how you are actively interacting with the RDAs when they are seeking
to take initiatives in this area?
(Mr Summerfield) I was really talking about one specific
project. The specific project you mentioned was the major project
in the West Midlands.
76. It is in the East Midlands.
(Mr Summerfield) I think we might be at cross purposes.
77. We could be.
(Mr Summerfield) There is a large project being debated
hotly at the moment to put up a very large kitchen. Is this the
same project we are talking about?
78. No.
(Mr Summerfield) In which case we are talking about
two separate projects.
79. I have some concern that a major initiative
within one of the RDAs for the development of its food sector—incidentally
the East Midlands is the home of a large chunk of the ethnic food
industry, much of the enterprise and innovation you referred to
earlier comes from there—seems to have passed you by.
(Mr Summerfield) Yes.
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